Commodities and Gold

Introducing a Commodity Fund for Diversification

The iPath Bloomberg Commodity Index Total Return ETN (DJP) is designed to provide exposure to the Bloomberg Commodity Index.

The fund tracks a broad index of 22 different commodity contracts with maturity ranging from one to five months. As an exchange-traded note (ETN), DJP is backed by the well-known Barclays Bank PLC.

The Bloomberg Commodity Index reflects, in management’s words, “returns that are potentially available through an unleveraged investment in futures contracts on physical commodities comprising the index plus interest.”

The index that DJP tracks has 31% of its investments in energy, 23% in grains/oilseeds, 17% in industrial metals, 15% in precious metals and roughly 7% each in softs and livestock. To avoid concentrated holdings, the index caps exposure to any single commodity sector at 33% and exposure to individual commodities at 15%.

As a result of this policy, many investors turn to DJP for diversification in their portfolios. Interestingly, DJP attempts to create a fair representation of each commodity’s importance to the world’s economy.

DJP has returned 1.58% in the past year and 0.22% year to date. The mediocre performance of DJP and commodities in general can partially be attributed to the drop in oil prices over the last several months. Some analysts predict that upcoming inflation will lift DJP, which, like many commodity funds, is used by investors as a hedge against inflation.

DJP has $1.10 billion in assets under management and an expense ratio of 0.70%.

DJP’s top holdings and their respective weightings are: gold (11.87%), natural gas (8.55%), Brent crude (7.62%), WTI crude oil (7.55%) and copper (6.93%).

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For investors who are seeking a convenient way to make a play on the commodities market, I encourage you to look into the iPath Bloomberg Commodity Index Total Return ETN (DJP).

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.